Was the price of Five OK! for Desmond? ...

06Aug2010 Leave a comment

On the face of it, the takeover of Channel Five by Richard Desmond for a price of £103.5 million is a great example of two well-matched parties ending up with an agreement that suits both of them. . However, dig a little deeper and it would appear that Five’s owners, RTL, have got the better of the deal, by exploiting their “coinage” more effectively than Desmond.

“Coinage” is the currency used to make deals. Any win/win deal requires that the underlying needs of the parties to be met.  These are not just the outward expressions of what the parties say they want (things like price, delivery and quantity) but the underlying needs that drive the parties.  “Coinage” consists of concessions which have a high value to the receiver (because they meet one of these personal needs) but a low value to the giver – to whom they are the equivalent of loose change..

Looking at RTL’s needs in the negotiation it is not difficult to detect a need for “security”. Five has been shipping cash for some time – caught in a bind between falling ad sales, lack of scale and lack of funding to create original programming or expensive acquisitions. Its value has been written down by almost £400 million in the last two years. It lost £9.1 million last year and it has only 8% of the TV ad market. This cannot have been comfortable for parent company, RTL, part of the Bertelsmann family. And it certainly does not fit with Bertlelsmann’s normal, cautious approach to business.

From Richard Desmond’s point of view the “need” being transmitted loud and clear is a “belonging” need. Here we have an ambitious and successful Publisher with a well-known background in adult publications who probably wishes to join the club of “serious” Media owners. Adding Channel 5 to the Sunday Express, the Daily Star and Ok! Magazine makes him arguably one of the most significant Media owners in the country, and gives him the chance to create an E! Style channel based around showbiz and celebrity shows.

So, whatever Price was initially demanded for the sale of Five, it should  not in theory have been difficult for Richard Desmond to reduce that in return for accommodating RTL’s underlying security need to staunch the out-flow of cash. His “coinage” would have been an ability to make that pain go away instantly, based on the fact that he is a cash-rich individual, reputedly worth some £950 million.  Equally, RTL had some powerful coinage as well – it could accommodate Richard Desmond’s underlying desire to “join the club” of serious Media players. Its coinage would have been have been that it held the entry ticket for that club – albeit a rather scruffy one which brings admission only to a poor seat at the major broadcasting table.

So, who deployed their coinage to greater effect? Well, it surely must be significant that RTL put Five up for sale at £100million, and that is pretty much exactly the price Desmond paid for it. Moreover his bid was apparently twice that of his nearest competitor.  A good sign of coinage being well deployed is that one party ends up obtaining more of what it wants, because it uses its coinage to meet a high value need on the other side, and obtain what it needs in return. RTL would seem to have used the lure of media ownership to maintain a far higher value for Five than the market would otherwise have been prepared to accept.

Desmond may be very happy with his purchase, but it’s probably RTL who are laughing..

“Mandelson dominates the Field with a brilliant Third Man and a couple of Slips…. ...

04Aug2010 Leave a comment

The publication of Peter Mandelson’s memoirs of New Labour, “The Third Man” gives a fascinating insight into the mind of a great negotiator. It also reveals that even this master negotiator has some weak spots.

Peter Mandelson has successfully negotiated his way through more than a dozen years of Labour being in power, displaying enormous deal-making skills.

The perfect negotiator has all the possible negotiation behaviours at his finger tips. He can push for things when he needs to, using behaviour such as creating incentives or pressures for people to comply with his wishes, or making proposals with reasons to back them up. Sound familiar? He can also work off the other side’s agenda – actively listening, focusing on common ground and disclosing information or feelings to put people at their ease. Peter Mandelson has been able to display all of these behaviours too – particularly during his most recent stint in office, when he has been a paragon of easy-listening charm.

Great negotiators also have an instinctive grasp of negotiating process. They understand the value of planning – and Peter Mandelson has always appeared to plan all the way to the end. They know when to explore and how to identify and then exploit the other side’s needs. They know when and how to bid, bargain and close their deals.

Great negotiators also know the difference between “winning” and “losing”, and that “retreating” is not the same as losing. On both occasions when Mandelson has had to leave Ministerial office he has done so without fuss, knowing that his time would come again, and, on the occasion of his second resignation, knowing that a juicy EU Commissioner’s job lay just around the corner.

Master negotiators are also supreme at marshalling their own bargaining power so as to take advantage of the aces in their hand. Peter Mandelson has in particular managed his “network power” brilliantly. Nowhere is this more apparant than in his extraordinary ability to be both Tony Blair’s and then Gordon Brown’s trusted right hand. Sworn enemies they may both have been, yet each of them trusted Mandelson to “deliver” the rest of the party for them.

So, are there any chinks in the armour of this uber-negotiator? Maybe. First of all, effective negotiators tend to play win/win. Does Mr Mandelson do this, or is there a touch of win/lose in his approach, where a win for himself is much more important than a win for the other side? One of his great talents is an ability to not quite commit hemself wholly to anybody – this is one of the attributes that creates his network power. Yet, paradoxically, this virtue can be something of a vice if done to excess, as it can make someone seem as though they lack integrity. Being seen as having integrity is a key requirement for the consumate negotiator, and lacking such integrity is usually seen as a negative, win/lose behaviour. This win/lose attitude and unwillingness to commit may be corroborated by Mandelson’s candid admission in his book that everything New Labour ever published was about winning votes, regardless of whether it was right or wrong.

In addition, great negotiators know how to manage their own underlying needs so that they don’t give away too much in return for getting those needs met. Looking at the enormous number of rather impressive titles that Peter Mandelson has acquired duiring his most recent period in office (including Lord President of the Council and First Secretary of State), one could speculate that this is a politician with high esteem needs. Commentators have certainly noticed just how many photos of Mandelson with celebrities adorn the pages of “The Third Man” – and even the book’s title seems to demand equal billing for Peter Mandelson with Blair and Brown. This kind of limelight-seeking would not make him unusual among politicians, but if other people are aware of it, it may make it easier for them to get what they want off Mandelson. Perhaps Gordon Brown sensed that, and offering a spectacular package of power and titles was one way that he managed to persuade Mandelson to come back to office at his right-hand – a move that seemed impossible until it actually happened.

So, maybe Mandelson isn’t perfect. Then again, the perfect negotiator doesn’t really exist – we all have some things we could work on and even a great and clever negotiator like Peter Mandelson is no exception…

Allies to soldier on in search of peace-deal ...

04Aug2010 Leave a comment

Are we any closer to a peace deal in Afghanistan? Probably not, though it’s no surprise to find the beleagured Allies wishing and hoping that a deal was possible after a month in which Nato troops suffered their worst ever losses (102 brave men killed in June). The problem is that the ingredients for a negotiation are simply not present. 

The new commander of the Nato forces in Afghanistan, General Petreus, has an unenviable task. He is expected to wage a war that makes us look like we are winning, when we are not. He is also expected to create the conditions for peace, so that there can be a phased withdrawal by Coalition troops – which President Obama has signalled is to begin from the middle of 2011 onwards.

Yet this withdrawal can only happen if either (A) a peaceful solution is negotiated or – Plan (B) – the Afghan army is trained to the point where it has the capacity to lead the fight in the absence of Coalition troops. The Coalition has been enthusiastically talking up this possibility, but it seems somewhat remote. So, at the same time they have been equally enthusiastically clutching at any indication that peace talks are on the cards. Much has been made, for example, of the recent 3 day peace assembly or “Jirga” which took place in Kabul at which 1,600 delegates voiced their approval of President Karzai’s 156 page peace proposal. Optimism has also arisen as a result of unprecedented talks between Karzai and Pakistan’s General Ahmed Shuja Pasha (the head of their Intelligence Agency) about how Pakistan might mediate with Taliban insurgents based in its territory.

However, any optimism concerning peace talks is surely wishful thinking. Any negotiation requires both parties to want to strike a deal. There have to be not only conflicting interests but enough interests in common for negotiations to start. That is not the case here. One can easily see why the Allies want to negotiate a peaceful solution, since it may spare them an ignominious withdrawal. However, there is no real sign that the Taliban want peace talks in a hurry. They hear that the Allies want to start withdrawing next year, and they must be feeling that they are going to end up with what they want without the concessions which would be involved in peace talks. Significantly, they tried to attack the Jirga on June 2nd. Equally, when Britain’s new Military Chief, Sir David Richards recently indicated that coalition forces should open talks with the Taliban “pretty soon”, the Taliban response was “We do not want to talk to anyone..until the foreign forces withdraw from Afghanistan”

Negotiations also need both parties to be explicit about their wants and needs. The Taliban are very clear what they want. Is there any sign that the Allies are prepared to do be as explicit? Are we even sure why we are in Afghanistan? Do we need to be there to prevent an extremist and hostile Taliban-regime running a repressive and fundamentalist state? Or to prevent the Taliban training terrorists targeting the West? Is the agenda really to do with propping up a weak Pakistan regime, which, if it had a Taliban-backed Afghanistan as its neighbour, might succumb? This would leave the West confronting the prospect of the Taliban potentially having access to or influence over Pakistan’s nuclear weapons. Or is the agenda about something else entirely – recent reports from the Pentagon suggest that Afghanistan could be sitting on mineral deposits worth US$1 trillion and that it could become “the Saudi Arabia of Lithium” – a key component in manufacturing batteries for mobile phones and laptops. Whatever the reason, if the Allies can’t be explicit about their aims to themselves and their own populations, then they are hardly likely to be able to articulate these needs clearly in any talks with the Taliban.

Finally, any “Peace” needs a “Process” to go with it. Most treaty negotiations take months over simply setting up a process for dialogue. Issues such as climate-setting, timescales, the agenda, the identity of the participants and their negotiating authority all take time to negotiate in their own right. This all takes more time than the Coalition is likely to have before its scheduled withdrawal starts next summer.

So, if the ingredients for a negotiation aren’t there, it’s hard to see how meaningful peace talks can begin any time soon. In which case the Coalition had better hope that its Plan (B) is a good one..

Can The Odd Couple save the Euro? ...

05Jul2010 Comments closed

What next for the Euro? As forecast in this blog, the Euro-zone countries have been forced to stump up a massive rescue package in order to avert a sovereign debt crisis in Greece and other Euro-zone countries. Will that be enough? Possibly not, if the continuing state of unease displayed by the financial markets is anything to go by.

In this ongoing tacit negotiation between the Euro-zone countries and the financial markets, one problem is that the Euro-zone “negotiation team” need to project an air of certainty and conviction about their commitment to the Euro and each other. Yet the key members of that team, President Sarkozy and Angela Merkel, look about as united as Katie Price and Peter Andre.

Any disunity in the team on one side of a negotiation will always be picked up by the other and exploited to its disadvantage. So, irrespective of their differences, Sarkozy and Merkel need to stop looking like the Odd Couple, and start looking like a dream team, or they will inadvertently prolong the very crisis they are seeking to bring to an end.

Together with the IMF, the EU has created a loan-and-guarantee package worth €750 billion. This is intended to stop international money markets forcing up government bond interest rates – in Greece, Spain and Portugal – to such unsustainable rates that their debt collapses under its own weight, and sparks a wider Euro-zone debt crisis.

The package included €220 billion provided by the IMF, €440bn of government-backed loan guarantees and a commitment for the European central bank to buy European sovereign bonds. What’s more, to combat rising financial market tensions triggered by market fears over public finances in the weaker Euro-zone countries, the EU decided to more than double its existing payments facility used in 2008 to help Latvia, Hungary and Romania – increasing it by €60bn to €110 billion. All of this is on top of the €110 billion rescue package agreed by the EU and the IMF for Greece only days earlier.

The extent of the package underlines the threat the debt crisis has posed to Euro-zone stability. Anders Borg, Sweden’s finance minister, said: “We are seeing wolf-pack behaviour in the markets, and if we don’t stop these packs, they will tear the weaker countries apart.”

There was initial positive reaction to the package from the markets. Erik Nielsen, chief European economist at Goldman Sachs, said the outlines of the package were impressive; “In any comparison, in terms of financing needs in southern Europe, this is a substantial amount.”

However, that optimism seems to have evaporated and has not been re-captured by announcements of austerity packages from two of the most debt-laden Euro-zone countries, Portugal and Spain.

The Dollar now stands at US$1.25 against the Euro, slightly up from its horror level of US$1.19 at the beginning of June. But the exchange rate is a long way from the US$1.43 level at which it stood only 4 months earlier. There is now concern that the economies of the 16 Euro-zone countries are so disparate and the debts of the weaker countries so enormous, that the Euro itself cannot survive as a common unit of currency.

What is contributing to these fears? For the answer, we need to put the microscope on the personal chemistry between the bed-fellows at the historical heart of Europe’s economic and political composition.

Alignment between France and Germany has always been the key to EU stability ever since the creation of the first European Coal and Steel Community in 1952. On the face of it, France and Germany displayed a unified front concerning the rescue package. Angela Merkel declared that the deal proved that, “Europe can act together to defend our common currency against attacks”. Christine Lagarde, French finance minister, said the response from international authorities was “consolidated, coherent and determined”.

However, whilst France and Germany profess a united approach, Angela Merkel faces deep political problems over continued German support for the Euro. Germany has to contribute more to this kind of package than other countries because it has the biggest economy. Complaints about Germany leading the Greek bail-out have been very vocal. Merkel has recently lost elections in North Rhine-westphalia and last week narrowly avoided her choice for presidential nominee being voted down by her own party colleagues.

So, the two leaders therefore face different political contexts. On top of this, there are striking behavioural differences between them. Sarkozy negotiates from the “heart”, using plenty of disclosing behaviour and creating emotional pressures and incentives to get his way. There is even talk that he threatened to pull France out of the Euro unless Merkel agreed to the latest EU plan to stabilise the currency. Merkel is much more of a “head” negotiator, using rational behaviours such as “proposing with reasons” and “testing and probing” of positions to secure her needs.
“Heart” and “head” negotiators often find it difficult to negotiate together because of their differing styles. These differences make them wary of each other. Heart negotiators find head negotiators aloof and cold; head negotiators find heart negotiators too emotional and impulsive. Moreover, these differences are accentuated when the parties are under pressure, when we all tend to default to our favourite behaviours.

We might expect financial markets to pounce on this schism in “Team-Euro” soon, anxious about their lack of unity and as a result betting against the Euro once again.

If, as expected, the Euro-zone countries are required to put together yet another rescue deal in response, then that lack of natural empathy between Sarkozy and Merkel may yet de-rail the Euro. When you are under pressure to get a deal done you need to be able to trust your team mates instinctively. As Elvis so rightly put it, “we can’t go on together with suspicious minds…”

Paralysed England need new Backbone to move on ...

03Jul2010 1
Comment

The debate over whether Fabio Capello should stay or go has obscured the real reason why England lost so badly to Germany and crashed out of the World Cup. It is a feature of any negotiation that winners have a positive attitude. This is a feature of traditional business negotiations and also of “physical” negotiations like sporting contests.

In this case the difference in attitude between England and Germany is palpable. Germany take to the field expecting to win. England take to the field fearing that they may lose.

If you bring a losing attitude to a negotiation, that dictates your own behaviour and the attitude of others. You become less ambitious in your aims, your behaviour is tentative, you anxiously fluff your lines. All of this fuels the attitude of the other side; they become more ambitious,  more confident and more assertive. Sounds familiar from watching England play?

Germany have progressed further than England in every single World Cup since 1966. That’s 11 tournaments in a row.  Once may be chance, twice a coincidence, three times is a pattern, eleven times is an inevitability.

It is the difference in attitude which makes the difference. England will not beat Germany in a competitive fixture at the World Cup until that attitude changes. This issue is more important than goalkeeping bloopers, penalty misses, refereeing errors, mid season breaks, whether England are wearing their lucky strip, or any other reason which is cited as an excuse for England’s repeated failure to progress.

If this is the case there is no point sacking Capello – he at least is a “winner” who always expects to win. It is the players who are the problem. The so-called “Golden Generation” have failed so often that the expectation of failure at this level is hard-wired into their attitude. It must be tempting now for Capello to abandon these older players. I would encourage him to select a group of young players not older than 20 and work with them through the Euro’s and on to the next World Cup. Players would be selected for this group not just on the basis of their ability, but also their attitude – do they have the invincibility of youth to go out on the pitch expecting to win?

Taking this strategy may mean that if we meet Germany again in the 2014 World Cup we have a chance of winning the match. But we have to win the mind game first…..

Can BSkyB resist Rupert’s Bear-hug? ...

21Jun2010 Leave a comment

The proposed deal for News Corp to buy out the other existing shareholders at BSkyB throws up some interesting scenarios in relation to the participants’ needs and how they can best be met. A quick look at the needs, bargaining power and behaviour patterns on all sides suggests that a deal will be forthcoming. But how this might be viewed in any investigation by the Competition Authorities is another matter.

Looking at the needs of Rupert Murdoch’s Newscorp it would seem that a familiar pattern is being played-out. The deal would provide a source of cash from BSkyB’s operations which are forecast to grow rapidly – by as much as 70% over the next 2 years. This would no doubt be useful to Murdoch’s media empire at a time when there is a reassurance need for cash-flow, as newspaper revenues plummet all over the world, and the jury remains out on whether this trend can be reversed through the introduction of the kind of “pay-walls” recently introduced by Murdoch for The Times newspaper.

In terms of other personal needs, there is no need to dwell long on the partial satisfaction of Murdoch’s ‘achievement’ need which this deal would also represent. The man has been executing headline-grabbing and ground-breaking media deals for 60 years, and is not likely to stop scratching that itch until he is 6 feet under, at the earliest.  The deal is also another gratifying instalment in the saga of the Murdoch Dynasty, a family that loves to be seen to be commanding respect and attention.

That brings us to James Murdoch, who as CEO of BSkyB finds himself in an interesting position. It is hard to believe that Murdoch’s bid would have been launched without his son’s tacit support. However, though he is no doubt loyal to his family, I wonder if there is something just slightly irritating in this deal for baby James?

Like any child of a masterful parent, he may sometimes feel that his father’s shadow looms large in his life. Children in his situation often develop strong and understandable needs to create their own achievements. Over the last few years he has successfully escaped Murdoch Senior’s shadow by forging his own formidable reputation as a very successful and smart businessman. Now he finds himself on the brink of coming back under his father’s wing again.

It may well be that as part of the deal to garner his son’s support for this take-over, Rupert Murdoch has had to come up with some ‘coinage’ – a negotiating reference to a concession which may not have huge value to the giver, but is highly valued by the receiver because it meets a personal need. Perhaps this coinage is a potential new role for his son, maybe in another company or division, where James can continue to develop his reputation and success, and satisfy his own dreams and ambitions independently of his father. Or maybe, dare one say it, it’s even a promise that Rupert Murdoch will step aside from running the combined entity in due course in favour of his son?

And what of the other independent Board members of BSkyB, including heavyweights like Gail Rebuck (Chairman and CEO of Random House), Alan Leighton (ex CEO of Asda) and Nick Ferguson? They may well be feeling that this is a difficult deal to stop, regardless of their point of view. Newscorp has a lot of bargaining power to bring to the table:

  • Market power, weight deriving from its size and resources
  • Expert power in relation to its understanding of the satellite-TV market
  • Network power based on the connection between Murdoch Senior and his son.

In this context, other Board members may be feeling uncertainty as to their own position, if and when the takeover happens. Rupert Murdoch is known as a tough negotiator whose style is based on ‘pushing’ his own agenda, rather than accommodating the needs of others. So, the other BSkyB Board members may feel that their needs are best satisfied by preserving their own reputation for integrity and shrewdness, through pushing Murdoch to the highest price to which he will go.

This certainly seems to be the gist of the early exchanges of bids, with BSkyB rejecting Murdoch’s current bid of 700 pence per share and insisting that a price in excess of 800 pence per share is required. This would value the 61% of BSkyB shares that Murdoch wishes to buy at some £1 billion more than the News Corp offer of £8 billion (which itself represented a 27.5% premium above the average BSkyB share price over the last 12 months).

Rupert Murdoch is not a man easily put-off when he closes in on a potential acquisition, so the expectation must be that, ultimately, enough needs would be met by all participants that BSkyB agrees to the take-over deal. Whether the Competition Authorities will feel the same way is another question.

There may be issues in Brussels and in front of the OFT about an arrangement which would give one company control over the largest digital pay-TV platform in Britain, major newspapers such as the Times, Sunday Times, and the Sun, and a burgeoning broadband and telephony operation. However, that’s another deal for another blog…

No substitute for cash; why the Glazers’ goal is to keep possession at Man Utd ...

18Jun2010 Leave a comment

The true and parlous picture of Manchester United’s debts has become a little clearer over the past few weeks. The highly leveraged takeover of the club by the Glazer family has turned the club from one of the wealthiest in the world into a beast burdened by over US$720 million of debt. The club has become liable for US$460 million in interest, fees and charges since the Glazers acquired it in 2005. Are the Glazers showing any signs of being bothered by this? No. Are they looking to bale-out by accepting an offer to sell the club and walk away? Almost certainly not. Why? Because a sale at anything less than a ridiculous price would be unlikely to meet their negotiating needs.

Two attempts have been running in parallel to oust the Glazers. Firstly an increasing number of club supporters have symbolically adopted the “green and gold” colours of the club’s spiritual fore-runner, Newton Heath, and vocally called for the Glazers to go at a succession of home matches. This group, orchestrated by the Manchester United Supporters Trust has created a hostile atmosphere which the Glazers’ have so far pointedly ignored. Secondly, the band of potential investors called the “Red Knights”, led by Goldman Sachs banker, Jim O’Neill and consisting of high net worth individuals who are all Manchester United fans, has created a consortium to buy the club. Reportedly, they were preparing to put together an offer of £1 billion to buy the club until the Glazers let it be known through the media that they were uninterested in selling-up at anything less than a valuation in excess of £1.5 billion. Why would this be? The answer is that the Glazers appear to have two negotiating needs, neither of which would be served by a sale at this time.

The first is cash-flow. The Glazers’ First Allied Corporation which owns and rents out shopping malls in the US is in trouble. Four malls have recently gone bust and another twenty eight are on a “watch list” which means that Banks are worried about whether their mortgage repayments can be serviced by the rental income they earn. First Allied owes US$567 in mortgages which is not likely to be cleared any time soon. The Glazers also have £202 million of very expensive PIK loans to service at Manchester United on which the interest will shortly climb to an eye-watering 16.25%. So, the Glazers have a “reassurance” need for ongoing cash-flow. Manchester United generated a record £278 million in cash last year, and there are no other parts of the Glazer Empire reliably delivering cash of this kind. Moreover, the Glazers have been able to extract nearly £23 million in management and consultancy fees and loans from the club since they took over, which has clearly been used to finance their personal life style. In addition, as part of the recent bond issue by which the club re-financed £500 million of its borrowings, the Glazers were given the freedom to take up to £100 million out of the club plus half of its annual cash profits. When the rest of your Business is in trouble why would you be keen to relinquish this kind of cash flow?

The second reason why the Glazers would be unwilling to sell the club is that they are running something of a business dynasty. Malcolm Glazer’s sons, Edward and Kevin Glazer are directors of First Allied. Three other sons, Avram, Joel, and Bryan are Directors of Manchester United and their struggling American Football franchise, “the Bucs”. Malcolm Glazer’s daughter, Darcie Glazer Kassewitz is a co-president of the family’s charitable foundation which is associated with the Bucs. With this kind of dynasty comes a “respect” need in relation to the family’s name and business reputation which makes it unlikely that the Glazer family would wish to bale out of Manchester United ignominiously.

So, don’t expect the full time whistle to blow on the Glazers tenure at old Trafford any time soon – not unless someone makes them an offer they can’t refuse which would satisfy both their need for cash-flow and the desire to preserve their family esteem.

Paul Rich Award Winner ...

07Jun2010 Leave a comment

Heavy Turbulence grounds British Airways Negotiations ...

24May2010 Leave a comment

Another week of turmoil at British Airways, involving record losses of over £500 million, more industrial unrest with Unite, and culminating in a near-riot by bitter airline staff at ACAS on Saturday night.

This dispute has now been running for over 15 months. This is highly unusual in post-Thatcher Britain, with all its obstacles against Union-organised strikes. What is going on here? The parties seem to have got themselves into a spiral of ‘lose/lose’, where it’s more important to damage the other side’s interests than to secure their own. If that’s the case, then how on earth are they going to break that cycle and strike a deal?

The headlines this morning were all about the ACAS Headquarters being invaded by ‘left-wing’ protesters, jostling and abusing Willie Walsh. They had apparently gathered as a result of Derek Simpson tweeting about the progress of the talks from the negotiating room.

From a PR point of view, the incident is a gift to Willie Walsh. It enables him to continue to paint Unite and its fellow Stewards and Stewardesses Union, BAASA, as extreme, divided and unreasonable. He could also be seen on the Andrew Marr show on Sunday morning, piously declaring how shocked he was to find Unite’s Simpson tweeting the confidential nature of the discussions in real-time. Some commentators have even been moved to sympathy for Walsh as a result of him being cornered by militants in this way.

However, it may be more revealing to consider why this behaviour is happening, rather than just condemning it out of hand.

This kind of gratuitously aggressive behaviour looks like it results from a ‘lose/lose’ attitude. This is the kind of attitude that develops when one party to a negotiation feels that the other side is determined not to give them a ‘win’. Sometimes a revenge psychology develops in which the aggrieved party says to itself ‘Well if you’re not going to give me a win then I’m going to make bloody sure you lose as well’. This frequently tips the other side into a lose/lose attitude too, and a counter-productive ‘tit for tat’ process develops in which each side forgets what it originally wanted and just focuses on causing damage to the other party.

If Unite and BASSA have a lose/lose attitude now, it can only be because BA and Willy Walsh spent too long playing ‘win/lose’ and giving the Unions no prospect of a win.

This would accord with reports of Willy Walsh himself having a very abrasive attitude to the negotiation. He has been variously described by Unite representatives over the past weeks as ‘macho’, ‘petty’ and ‘vindictive’. Walsh himself now seems to reciprocate this attitude, describing Unite as ‘dysfunctional’ and out to ‘destroy’ BA.

This has seen him apparently lose focus on his original negotiating aim (to deliver £62 million of savings) and instead get embroiled in a fist fight at far greater expense to the airline (the strikes so far have cost BA £40 million and it’s estimated the further planned strikes will cost BA up to another £140 million).

If both parties now have a lose/lose attitude then the parties are going to find it hard to reach agreement. What needs to happen is that both sides change their approach to a ‘win/win’ attitude, in which each side is permitted to obtain an acceptable amount of what they want.

Given that both parties are going to need to work together going forward it should not be difficult to see why this attitude is sensible all round. However, when the parties are mired in ‘lose/lose’ attitudes this is easier said than done.

A shift in the climate of the negotiation from ‘hostile’ to ‘cool and objective’ or even ‘open’ needs to take place. Going to ACAS is a step in this direction, but I would suggest the parties need to go further.

New talks should take place at a completely different venue that shifts the moods of the parties and focuses them positively. How about on an aeroplane flight, where each side can be reminded of the real purpose of the business they are arguing about? And each party should bring along different representatives to engage in the discussion, who have not been brutalised by the negotiations so far. Messrs Walsh, Woodley and Simpson should arguably not be there at all. These representatives might not bring the same baggage to the conversations, and so would have a better chance of re-setting the climate.

If that can be done, then the parties have a chance of re-exploring their issues positively and coming up with a deal which saves face and addresses each side’s needs.

Failing that, either one side is going to end up imposing a win/lose solution on the other, (which will not last, as nobody likes to end up as a loser) or the talks may continue to stay grounded for some time yet.

Is it Cesc Mate for Arsenal? ...

23May2010 Leave a comment

Who holds the aces in the three-way negotiation between Arsenal, Cesc Fabregas and Barcelona? Ultimately, outstanding footballing talent carries a huge amount of bargaining power, but the two football clubs involved still hold some powerful cards.

There is of course a 3-way negotiation going on.

In the negotiation between Fabregas and Barcelona, Fabregas holds the ‘market power’ associated with being an outstanding talent in a limited pool of exceptional players. Demand exceeds supply for a resource such as his. Barcelona have some market power of their own though. They are arguably the best club side in the world currently, with a midfield packed full of international stars. They are also the desired point of entry for Fabregas back to his native Spain. This gives them a certain amount of ‘network power’ – as gatekeepers to a grouping to which Fabregas wants access. I would assess the balance of this negotiation as a 2-2 scoring draw.

What about the balance of bargaining power between Arsenal and Fabregas? The market power that Fabregas has as a key talent is even greater with Arsenal than Barcelona. Having failed to win a trophy for 5 years will have weighted another key aspect of bargaining power against Arsenal. They need to retain a talismanic talent like Fabregas. The negotiating authority that Arsene Wenger would have had when Fabregas first joined the club as a 16 year old will have diminished, not just as a result of the Spaniard’s maturing talent, but also as a result of Wenger and Arsenal’s comparative lack of success over the last 5 years. I would score this negotiation 3 Aces to 1 in favour of the player.

And the balance of power between Arsenal and Barcelona? Barcelona have the advantage which stems from team Arsenal being dis-united. A negotiating team is only as strong as its weakest link and Fabregas has already made clear that he no longer wants to be part of his own team.

Arsenal do have one advantage though. This is the power that comes from having ‘law’ or ‘regulation’ on your side – in this case a binding contract. The Gunners could use this to kybosh any move by their current star. Bear in mind that Barcelona will have generated a ‘cool’ or ‘hostile’ climate in the negotiation with Arsenal by approaching the player directly, so the Gunners may not be in the mood to play ball with anybody at the moment.

However, this would be something of a ‘lose/lose’ strategy, since keeping an unhappy player at a club is not renowned for generating a happy dressing room. Arsenal and Wenger are probably too shrewd for that. Instead they will marshal the bargaining power their contract gives them, and sooner or later, this season or next, they will let Fabregas go for a big fee.

Barcelona hold the balance of power in their negotiation with Arsenal and will use that to secure a win – even if it takes some extra time.